IT’S TIME TO ACCESS HOME EQUITY

Before refinancing, have a clear understanding of your financial goals. Determine whether you want to lower your monthly payments, shorten the loan term, and/or access your equity for other purposes.

There is not just one credit score used in credit underwriting. Depending on the type of credit and credit bureau, scores may vary widely. Mortgage lenders pull 3 scores and choose the lowest middle score of all borrowers on the application to determine underwriting and pricing criteria. It’s best to talk home loan specialist to learn exactly what your score is as it relates to getting a home loan.

Most residential home loans DO NOT have a prepayment penalty, which means under the right conditions a homeowner could refinance less than 6 months after their initial loan closes. Interest rates can fluctuate rapidly, so even if you got your loan recently, it may make sense to refinance.

Within three business days of your submitted application, Federal law requires that the borrower be given a Loan Estimate (LE) based on the anticipated closing costs. Keep in mind these are binding and changes are limited. Many lenders may offer a Fee Worksheet in lieu of a Loan Estimate. These are NOT binding and should not be relied upon when choosing a lender.

Refinancing may involve closing costs, which is comprised of application fees, appraisal fees, and other charges. You may consider a loan option that minimizes or eliminates these costs. Though these options can influence the interest rate, it may be a wise choice depending on how long you plan on keeping the loan.

Calculate the break-even point, which is the time it takes for the monthly savings from refinancing to offset your closing costs. If you plan to stay in your home beyond the break-even point, refinancing may be a good option. For example:

• By refinancing I save $250 a month.
• My up-front closing costs are $5500.
• $5500/$250 = I would need to stay in my loan 22 months to break even.

At the time of loan application, a borrower generally has the choice of locking in their interest rate or allowing the rate to float. By locking in the rate at the time of application, you are guaranteed that interest rate so long as your loan closes no later than the end of your lock in commitment. Until a Locked Loan Estimate is issued, the rate is floating and subject to change. You can also choose to float the rate if you anticipate further decreases in the interest rate during your application process.